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ID: 2474058 • Letter: H
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home / study / business / accounting / questions and answers / wilkins inc. has two types of handbags: standard ... Your question needs more information to be answered. A Chegg Expert needs more info to provide you with the best answer. See comments below. Question Edit question Wilkins Inc. has two types of handbags: standard and custom. The controller has decided to use a plantwide overhead rate based on direct labor costs. The president has heard of activity-based costing and wants to see how the results would differ if this system were used. Two activity cost pools were developed: machining and machine setup. Presented below is information related to the company’s operations. Standard Custom Direct labor costs $53,000 $108,000 Machine hours 1,190 1,500 Setup hours 110 440 Total estimated overhead costs are $308,800. Overhead cost allocated to the machining activity cost pool is $196,400, and $112,400 is allocated to the machine setup activity cost pool. Collapse question part (a) Correct answer. Your answer is correct. Compute the overhead rate using the traditional (plantwide) approach. (Round answers to 2 decimal places, e.g. 12.25%.) Predetermined overhead rate Entry field with correct answer 191.80 % of direct labor cost SHOW SOLUTION SHOW ANSWER LINK TO TEXT LINK TO TEXT By accessing this Question Assistance, you will learn while you earn points based on the Point Potential Policy set by your instructor. Attempts: 1 of 3 used Collapse question part (b) Compute the overhead rates using the activity-based costing approach. (Round answers to 2 decimal places, e.g. $12.25.) Machining $ per machine hour Machine setup $ per setup hour
Explanation / Answer
(a) Budgeted overhead cost = $308800
Budgeted direct labour cost = $108000+$53000 = $161000
Predetermined overhead rate
= Budgeted overhead / budgted labour cost
= $308800 / $161000
= 191.80%of direct labour cost
b)
Overhead cost allocated to machining activity = $196400
Budgeted number of machine hours = 1190+1500 = 2690 hours
Overhead rate per machine hour for the machining activity = $196400 / 2690 hours=$73.01 per hour
Overhead cost allcated to set up activites = $112400
Budgeted number of machine set up hours = 110+440 = 550 set up hours
Overhead rate per machine hour for the setup activity = $112400/550 = $204.36 per setup hours.
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